The Carlisle Mosquito Online

Friday, May 3, 2002


The audience that nearly filled Union Hall to hear a panel discussion of "Economic Globalization" must have driven home somewhat dazed by the complexity of the concept, but with a truckload of food for thought. The speakers, Oxfam America president Ray Offenheiser, International Monetary Fund (IMF) technical assistance advisor Neils Larsen and Northern Alliance for Fair Employment coordinator Tim Costello, brought a wealth of first-hand experience to the table. The panel was sponsored by the social action committee of the First Religious Society as part of an on-going exploration of issues of economic justice. Moderating was Carlisle selectman Tim Hult, who not only set the rules but posed a number of challenging questions to help frame the issues.

Seeing a need to deconstruct the term "globalization," Offenheiser suggested that an economist sees it as the integration of markets on a global scale, "a sort of frictionless economic exchange." The head of a corporation visualizes a worldwide market for goods, services and capital providing unlimited opportunity for growth and profit. Laymen tend to view it in terms of heightened means of communication, the spread of technology, an extraordinary source of information and free cultural exchange. Social justice people see dissemination of knowledge and ease of communication as good, but condemn the impact on the environment and the social injustice that often follows a total market approach.

As for the IMF and the World Bank, agencies set up in 1944 to provide capital and know-how to developing countries, and the World Trade Organization (WTO) established in 1995 to monitor and enforce trade agreements, Offenheiser said they reflect the so-called Washington Consensus, the conviction that the world would be a better, safer place if everyone takes part in an export-led economy featuring open markets, free flow of capital, privatization of production and services ­ all with a minimum of government regulation.

An inevitable difference in perspective
Panel members (l to r) Northern Alliance for Fair Employment coordinator Tim Costello, IMF technical assistance advisor Neils Larsen and Oxfam America president Ray Offenheiser discuss the complexities of economic globalization. (Photo by Lois d'Annunzio)

The inevitable differences in perspective were clearly evident in Costello's opening remarks, in which he declared himself in favor of globalization, saying "We've had enough of strife and animosities across borders. I hope some day to see us view each other first as human beings and second as national, ethnic, economic or cultural beings." However, as a lifetime union member, he added that he could not support corporate globalization which he believes has led to "a race to the bottom," in which poor countries compete for jobs by providing cheap labor, freedom from workplace standards and a minimum of governmental oversight. Costello indicated that this competition for jobs is not just a North/South conflict but increasingly a South/South race in which multinational corporations seek the lowest wage workforce. Typical was the movement of 200,000 jobs (probably originally from the States) from the maquilladores in northern Mexico, where the hourly wage is $1.59 to China, where it is 43 cents.This happened in spite of Mexico President Vicente Fox's offer to move them to southern Mexico where wages are lower and many of the workers would be closer to home. As a labor negotiator in the United States, Costello reported that he was all too familiar with corporate threats to move to Mexico or overseas if labor's demands were not dropped.

In his opening remarks Larsen stressed that, while he was not a spokesman for the IMF, he was convinced by his work in third world countries that IMF and the World Bank's contributions to the developing countries have been outstanding in the realm of technology transfer, development of management skills and, above all, in institution building. "Most of the troubles in underdeveloped countries are due to weak institutions and capitalism without rules is intolerable," he declared.

The example of the former communist countries

Larsen used the example of the former Communist countries where the closing of state-owned factories and removal of social subsidies had left the industrial workers and the elderly destitute. The legal and financial institutions had to be established from scratch, and this kind of rebuilding took far more time than anyone had anticipated. The contributions of the IMF and World Bank to this task "have been critically important, but the results are not seen overnight."

Offenheiser seconded Larsen's sentiments about the importance of institution building; nevertheless he insisted that the present system of assistance and economic control as practiced by the IMF and World Bank is "rigged in favor of the U.S.and Europe." He argued that we push free trade, low tariffs and the removal of subsidies on other countries, conveniently forgetting that as we were building an industrial base, our government imposed high tariffs to protect our fledgling enterprises. Now the developing countries want a period to do the same. He further asserted that we have retained our own tariffs on many foodstuffs and subsidized others, with most of the supports going to U.S. agribusiness.


Offenheiser used the example of corn, the mainstay of Mexico's agricultural economy. Under the North American Free Trade Agreement (NAFTA), Mexico drastically lowered tariffs and price supports on corn. The subsidized product of American agribusiness then flooded the Mexican market, driving the price still lower. Result: Nearly a million, or about 30 percent of small, indigenous farmers were forced off the farms and into the cities. "In this kind of world," he said, "there are winners and losers, but most of the winners are the rich, while the losers are the little guys."

Their approach has made the situation worse

All three speakers agreed that while the IMF and World Bank have helped lift millions of people out of poverty, mostly in the Far East, their approach to economies in trouble has often made the situation worse. In return for a loan at a high rate of interest, the underdeveloped country is required to keep its own interest rates high, reduce government spending, privatize publicly owned industries and stabilize its currency, all of which Offenheiser sees aimed at protecting investors, often at the expense of the local populace. The country has incurred heavy debt payments, laid off workers, shredded whatever social safety net existed, while an overvalued currency may price their exports out of the market. Then as the situation worsens, currency speculators pull out en mass. This, he said, was the scenario in Argentina. Even Larsen described the Argentinian collapse as "a bad case of dogma gone wild."

In reply to a question from Hult to the effect, "If you believe things are not working, what would you do?" Offenheiser replied with an argument recently expounded by the former chief economist of the World Bank Joseph Stiglitz who has pointed out that the most successful of the globalizing third world countries, China and India, are precisely the ones that have determined their own rate of economic restructuring, kept controls on the flow of foreign investment, and restricted the outflow of both foreign and domestic capital. In other words, Offenheiser said, "Trade is good if the capital comes into a country and stays there."

Commenting that 51 percent of the 100 largest economies in the world are corporations, Costello asked bluntly, "Are we becoming a world of corporations rather than governments?" He pointed out that pressure from multinational corporations on the IMF and World Bank have urged that more and more activities be turned over to the private sector with nation states doing less and less. To which Offenheiser added, "What we have is corporations trumping governments."

The mention of corporate power challenging government brought a comment from the audience about Chapter 11 of the North American Free Trade Agreement (NAFTA) that permits corporations to sue governments, local and national, for passing public health or environmental legislation that diminishes the value of their property, reduces anticipated profits or "damages their reputation." She pointed out that suits have already been brought under that article in Canada, California and New Jersey. "How will sovereignty be affected when corporations can challenge laws and regulations arrived at democratically?"she asked.

Corporate powers vs. government

The mention of NAFTA surfaced a theme that had run through much of the discussion, the fact that all these global agencies that wield so much control over sovereign nations operate in almost complete secrecy. While Larsen freely admitted that the rules of world trade, written in secret, are crafted to help the nations that contribute most to their funding, he also believed that over time they can be made to operate more democratically and that "pressure from citizen groups like those represented here can exert leverage by banding together to create counter pressure." His listeners and colleagues hoped he was right.

The panel served as a kickoff for a series of workshops addressing the widening gap between rich and poor in our own society and around the globe. The first took place April 29 and will be followed by discussions on May 13 and 20, dealing with challenges in our own society, roadblocks to their resolution, and consideration of what a faith-based community might do to help.

2002 The Carlisle Mosquito